Zarah ChoudharyAccording to WEALTH at work, a financial education and guidance specialist, 60% of employers now offer or plan to offer pre-retirement planning programs, financial education, and access to professional advisers.
These services aim to help employees retiring in 2025 navigate the complexities of retirement planning.
One of the key steps recommended by WEALTH at work while planning for retirement was to calculate retirement costs.
The Pensions and Lifetime Savings Association (PLSA) estimated that a single retiree needs £14,400 annually for a minimum standard of living, £31,300 for a moderate lifestyle, and £43,100 for a comfortable one.
For couples, these figures rose to £22,400, £43,100, and £59,000, respectively.
WEALTH at work noted that 4.8 million pension pots were considered ‘lost’ in the UK, with one in 10 employees believing they may have lost a pot worth more than £10,000.
The Government’s Pension Tracing Service can assist individuals in locating lost pensions, while pension providers can supply up-to-date statements.
Employees were also advised to assess all sources of retirement income, including pensions, ISAs, savings, and investments, to gain a complete view of their financial position.
For those relying on the state pension, WEALTH at work highlighted the importance of verifying entitlement.
A minimum of 35 years of National Insurance (NI) contributions is required to receive the full state pension.
Individuals can purchase NI credits to fill gaps in their record, but after 5th April 2025, they will only be able to backfill six years of contributions.
Defined benefit (DB) pensions provide a set income based on salary and years of service, while defined contribution (DC) pensions offer more flexible options, such as income drawdown, annuities, or lump-sum withdrawals.
WEALTH at work also emphasised the importance of shopping around for retirement products to compare costs and features.
For example, income drawdown charges vary significantly depending on the provider.
Tax planning was another consideration, as only 25% of a DC pension is tax-free.
Taking large withdrawals may push retirees into higher tax brackets, so spreading withdrawals over multiple years can help minimise tax liabilities.
Finally, WEALTH at work warned of the risks of pension scams, which caused victims to lose over £17.7m in 2023.
Employees were advised to verify that any company they deal with is authorised by the Financial Conduct Authority (FCA) and to use the ScamSmart website for guidance.
These steps, WEALTH at work suggested, could help employees retiring in 2025 make informed decisions about their financial future.
Jonathan Watts-Lay, director at WEALTH at work, said: “We spend many years saving for our retirement and deciding how to manage this money is one of the biggest financial decisions people make.
“It is heart-breaking when people make mistakes with their hard-earned savings which could have been so easily avoided.”
“This is why many employers and trustees are now working together with financial wellbeing and retirement specialists to help individuals engage with their pensions and savings throughout their career, and then to understand the options at retirement.
“However, before proceeding it’s essential to carry out due diligence on any providers.
“This includes ensuring that they are workplace specialists and checks on advice firms should cover areas such as qualifications of advisers, the regulatory record of the firm, compliance processes and the pricing structure.
“Ultimately, empowering employees with access to appropriate support at the right time can improve financial capability and resilience which should result in better retirement outcomes for all.”
